As a business owner or self-employed individual, you likely use LinkedIn to network and market your business. With a premium LinkedIn account costing around $30-60 per month, this raises the question – can you write off your LinkedIn expenses on your taxes?
The short answer is yes, you can deduct certain LinkedIn expenses on your business taxes. However, there are some caveats and limitations to be aware of. In this comprehensive guide, we will cover:
- The tax benefits of writing off LinkedIn expenses
- What types of LinkedIn expenses are deductible
- How to calculate and track deductible LinkedIn expenses
- Claiming the home office deduction for your LinkedIn usage
- Limitations and common pitfalls when deducting LinkedIn expenses
- Recordkeeping requirements from the IRS
Let’s dive in…
The Tax Benefits of Writing Off LinkedIn Expenses
As a business, writing off eligible LinkedIn expenses on your taxes provides two major benefits:
- It reduces your annual taxable income, which lowers your overall tax bill.
- It saves you money by offsetting those LinkedIn expenses.
For example, let’s say your business brought in $100,000 in revenue last year. You also spent $500 on LinkedIn advertising and subscription fees.
If you write off the full $500 in LinkedIn expenses, your taxable revenue would be reduced to $99,500. This means you’d pay taxes on $99,500 instead of the full $100,000.
Essentially, writing off eligible LinkedIn expenses allows you to deduct those costs before calculating the taxes you owe. This results in substantial tax savings, especially if you have significant LinkedIn expenditures each year.
What Types of LinkedIn Expenses Are Deductible?
Now that we’ve covered the tax benefits, what LinkedIn expenses can you actually write off? Here are some of the most common deductible LinkedIn costs:
LinkedIn Premium Subscriptions
Premium LinkedIn subscriptions offer additional features like InMail messaging, profile boosts, and expanded analytics. These plans range from around $30 to $60 per month.
As a business expense, premium LinkedIn subscriptions are deductible if the upgraded features help you market and operate your business. The deduction would apply to the amount you pay per month.
LinkedIn Advertising
LinkedIn offers a variety of pay-per-click ads to help businesses promote content, pages, and more. Common options include Sponsored Content, Sponsored InMail, Text Ads, and Dynamic Ads.
Any money spent on LinkedIn advertising to market your business is deductible. This includes costs associated with creating and managing ads.
Other Business Use Fees
Beyond subscriptions and advertising, other deductible LinkedIn expenses may include:
- Fees for customized backgrounds, company pages, or showcase pages that promote your brand.
- Costs associated with using LinkedIn services for recruiting, like LinkedIn Recruiter.
- LinkedIn Learning courses or other training that helps improve your business capabilities.
- Premium LinkedIn sales tools like Sales Navigator that help generate leads.
The key is showing how these expenses directly benefit your business activities.
How to Calculate and Track Deductible Expenses
To claim LinkedIn deductions on your taxes, you need to accurately track your eligible expenses. Here are some tips:
- Review bank and credit card statements for LinkedIn subscription fees, advertising charges, and other expenses. Record these amounts.
- If you pay annually for LinkedIn services, divide by 12 and deduct that portion each month.
- For advertising, document the monthly amount spent along with invoices and reports from LinkedIn.
- Keep receipts for one-time LinkedIn expenses like customized pages or courses.
- Determine the business vs. personal percentage if you use LinkedIn for both. Only deduct the business portion.
- Use accounting software or spreadsheets to easily track deductible LinkedIn expenditures.
Proper documentation and categorization of these expenses makes tax time easier.
Claiming the Home Office Deduction
Many entrepreneurs work from home. In that case, you may be able to claim an additional home office deduction for your LinkedIn usage.
Two options exist here:
The Simplified Option
Introduced in 2013, this method lets you deduct $5 per square foot of your home office space up to 300 square feet. No calculation of business vs. personal use is required.
If your home office is 150 square feet, you could claim $750 ($5 x 150 square feet) in addition to your other LinkedIn deductions.
The Regular Method
This option involves calculating the percentage of your home used for business activities. You can deduct a portion of expenses like rent, utilities, insurance, and repairs based on this percentage.
For example, if 25% of your home is used as a home office, you could deduct 25% of eligible housing expenses. LinkedIn usage from this home office would boost the deduction.
Consult IRS Publication 587 for full details on the home office deduction options. Proper documentation is key.
Limitations and Pitfalls
While writing off LinkedIn expenses sounds straightforward, some common limitations and pitfalls exist:
- You must use LinkedIn exclusively for business – no personal use.
- Mixed-use subscriptions and services may only be partially deductible.
- Improper documentation can lead to denied deductions and audits.
- You cannot deduct the cost of LinkedIn services used for investment purposes.
- Some usage may be considered entertainment, which has a 50% deduction limit.
- Taking an aggressive tax position can lead to penalties if expenses are disallowed.
Consult a tax professional to ensure you stay within IRS guidelines and avoid trouble down the road.
Recordkeeping Requirements
The IRS requires thorough recordkeeping to back up all tax deductions. For LinkedIn expenses, documents may include:
- Receipts showing fees paid for subscriptions, advertising, and services.
- Bank and credit card statements listing LinkedIn charges.
- Invoices from LinkedIn verifying advertising costs.
- Records showing the business percentage of mixed-use LinkedIn subscriptions.
- Details on home office measurements for the deduction.
Keep accurate records throughout the year. Having clean documentation makes justifying your LinkedIn deductions seamless.
Conclusion
As a valuable business marketing tool, many LinkedIn expenses qualify as tax write-offs. From premium subscriptions to advertising fees, deducting these costs can generate substantial tax savings.
However, limitations exist on which expenses you can deduct. Plus, detailed recordkeeping is essential to verify deductions and avoid IRS issues. Tracking expenditures, distinguishing personal versus business use, and claiming home office deductions are key to maximizing your LinkedIn tax benefits.
Work closely with an accountant to ensure you properly write off eligible LinkedIn expenses. With the right approach, you can leverage LinkedIn’s capabilities for your business while lowering your overall tax obligations.